Biblical Case Against Inflation
Dr. Judd W. Patton
(Originally Written in June, 1983)
readers, since 1946, have come to understand that inflation is an increase
in the quantity of money issued by government. Inflation is emphatically NOT
higher prices! Higher goods’
prices are one of the inevitable consequences! They have come to understand
that the U.S. dollar is not based on the principle of In God We Trust,
but is premised on In Government We Trust. The dollar is Caesar’s
money, hardly Godly or Biblical money, the noble maxim notwithstanding.
has put his finger on the ultimate problem: “Inflation is itself an
immoral act on the part of government. When modern governments inflate by
increasing the paper-money supply, directly or indirectly, they do in
principle what kings once did when they clipped the coins.
Diluting the money supply with paper is the moral equivalent of
diluting the milk supply with water.”1
So very few
understand Hazlitt’s three sentences. The vast majority of contemporary
economists certainly do not. Most
continue to expound the supposed virtues of an elastic supply of paper money
and credit in solving economic ills. They frequently argue among themselves
over the rate of expansion while the more conservative economists among them
prefer to expand the money supply more steadily and smoothly. None wish to
recognize the morality, or should it be said the immorality, of inflation.
Indeed the morality of economic actions in general, and inflation in
particular, continues to be the “missing dimension” of economic science
and analysis. Few understand that the economic world is governed by
It is the
purpose of the article to articulate the morality or “missing dimension”
of inflation. The Biblical case against inflation is that it is sin. It
violates the commandments of God. And since sin IS the transgression of
God’s law (I John 3:4), and the wages of sin is death (Romans 6:23),
should it be surprising that the dollar, and the currencies around the
world, are dying?
spiritual side of inflation reveals the real cause of the world’s
seemingly intractable disease. Only it reveals the lasting solution.
the Bible, money is shown to be a certain weight of either gold, silver,
copper or brass. A few references will suffice to establish this fact.3
prophet bought a field from his uncle’s son. “and weighed out to him the
money – seventeen shekels of silver” (Jeremiah 32:9). As a shekel was a
little less than one-half troy ounce, this was about eight ounces.4
Joseph was sold by his brothers for twenty shekels of silver (Genesis
37:28). David used both gold
and silver. He bought a
threshing floor, oxen, and implements for fifty shekels (about two pounds)
of silver (II Samuel 24:24), but for the mountain upon which the threshing
floor was located, Mt. Moriah, he paid six hundred shekels (twenty-six and
one-half pounds!) of gold (I Chronicles 21:25).
In the New
Testament, the prophecy that the Messiah would be betrayed for thirty pieces
of silver (Zechariah 11:12) was fulfilled when Judas Iscariot did in fact
receive thirty silver coins, each one a shekel in weight (Matthew 26:15;
27:3). Coins had replaced the equal-arm weighing balance. Lastly, notice the
use of all three commodities as monies: “Provide neither gold nor silver
nor copper in your money belts” (Matthew 10:9).
Biblical Definition of Inflation
that all commercial and financial transactions be made in terms of honest
weights and measures. He
therefore defined precise units of account for length, weight, and volume
transactions (Ezekiel 45:9-12), and commanded that, “You shall do no
injustice in judgment, in measurement of length, weight, or volume
(Leviticus 19:35). He even
promised the blessing of long life for obedience to His standards
However, use of
the equal-arm weighing balance permitted three basic ways a merchant could
defraud another person. One
could: (1) “rig” the balance itself, (2) use stones or weights that are
not the inscribed weight, or (3) weigh out a debased money, mixed with
inferior metals, against a legitimate weight. But God made it abundantly
clear that, “For all who do such things, and all who behave unrighteously,
are an abomination to the LORD your God (Deuteronomy 25:16).
See also Deuteronomy 25:13 -15, Proverbs 11:1, and Proverbs 16:11.
righteousness is defined as keeping the commandments (Psalms 119:172),
falsifying the balance by monetary debasement (#3 above) is an unrighteous,
fraudulent act outlawed by the eighth commandment against stealing. God
outlawed monetary debasement (inflation) and any other form of it by the Ten
Yet the Bible
records numerous references for our benefit about the unheeding
Israelites. They suffered the
effects of higher goods’ prices by dishonestly increasing the quantity of
money. Notice Isaiah 1:22: “Your silver has become dross, your wine mixed
with water.” Dross is the
scum on the surface of molten metal. Ignoring God’s directives, the
Israelites had resorted to the fraudulent activity of mixing their silver
money with inferior metals, thus increasing the supply dishonestly and
Amos and Micah record scathing indictments: “Hear this, you who swallow up
the needy, and make the poor of the land fail, ... Making the ephah [grain
measure] small and the shekel large [by debasing the money so more of it was
needed to buy a given product thereby causing consumers to pay higher shekel
prices], falsifying the balances by deceit, that we may buy the poor for
silver, and the needy for a pair of sandals, even all the bad [inferior]
wheat (Amos 8:4-6). In Micah
6:10-11 we read: “Are there yet the treasures of wickedness [inflation
and/or fraudulent gains] in the house of the wicked, and the short measure
that is an abomination? Shall I count pure those with the wicked balances,
and with the bag of deceitful weights?”
Now it is
possible to understand James 5:3: “Your gold and silver are corroded, and
their corrosion will be a witness against you and will eat your flesh like
fire.” Gold and silver do not rust! Could
James be referring to such severe monetary debasement (hyperinflation), that
the whole society is brought down? Read
verses 1-3. It seems crystal
clear that the Biblical definition of inflation is monetary debasement.
final reference to inflation in Haggai 1:6-7, “And he who earns wages,
earns wages to put into a bag with holes.
Thus says the LORD of hosts: “Consider
your ways!” What an apt
analogy to describe the effects of inflation, a bag with holes!
With a purchasing power of fourteen cents of the 1940 dollar, it is
blatantly obvious that the dollar is holely, not holy! Caesar’s monies are
inflated. God’s money is not.
Consequences of Breaking the
a sin. It breaks the eighth commandment by stealing or defrauding others,
analogous to the activity of a counterfeiter. Morally then monetary
debasement is fraudulent, whether legalized by government or not. There are
many evil consequences.
visible, devastating economic effects include: (1) generally higher goods’
prices (what the public confusingly labels as “inflation”); (2) a
redistribution of income and wealth from the real producers to the inflation
recipients; and (3) the ups and downs in business activity known as the
business cycle. Let’s look at
these consequences in turn.
it needs to be pointed out that monetary debasement is no longer limited in
the twentieth century to mixing less valuable, inferior metals into gold or
silver (remember our silver coins prior to 1964?) or coin clipping.
Rather, modern-day monetary dilution or debasement occurs when
governments increase their money supplies (which includes currency and coin,
checking accounts and savings accounts) beyond their stock of gold or
silver. Both in principle and effects this expansion of Caesar’s money is
equivalent to actual money debasement as it necessarily victimizes some
individuals at the expense of others.
inflation does not represent or coincide with the production of real goods
and services. Thus this additional money, when spent by the recipients, will
tend to bid prices up of the commodities or services demanded.
As a result prices will rise, but not uniformly.
inflation permeates or works its way throughout the economy, the first
recipients will benefit the most. As
a result the distribution or ownership of wealth is altered.
In the absence of inflation, income and wealth accure, at least in a
free market, to those who produce them. But God demands righteous dealings
in the marketplace (Jeremiah 17:10; Revelation 22:12). Inflation
redistributes income in a manner unrelated to a person’s economic
contribution to production.
of the unrighteous redistribution of income due to inflation concerns
creditor-debtor relationships. Inflation tends to benefit debtors at the
expense of creditors. Debtors
can pay off their loans in depreciated money. Moreover, if inflation becomes
a continuous government policy, creditors will endeavor to reduce their
“gifts” to the debtors through higher interest rates. These higher
interest rates will then tend to retard long-term capital investment and
capital formation, lowering the standard of living of society in comparison
to what it would have been in the absence of the inflation-induced higher
Such are some
of the major effects of violating the eighth commandment.
Inflation is hardly a means to love your neighbor as yourself (Mark
the Business Cycle?
like the successful counterfeiter, requires misrepresentation. His
fraudulent bills pass as genuine. Similarly and biblically, inflation also
bears false witness. It is not what it appears to be. Inflation clearly
violates the ninth commandment (Exodus 20:16), while simultaneously breaking
witness manifests itself initially through interest rates, and then into the
whole price structure. As the newly created money enters into the loan
market, known economically as credit expansion, interest rates are forced
lower than real market conditions would warrant. These artificial, falsified
rates then mislead entrepreneurs in their calculations as to which projects,
processes, products, and technologies appear profitable.
economic “principle's” lesson seems necessary at this point.
The economic problem of any society is to coordinate the plans and
purposes of its individual members into an overall integrated production
network. The decisions of the entrepreneur-producers must “mesh” with
the decisions of other producers and obviously with consumer wants. In the
market it is the price system, along with profit and loss, that performs
this essential communication, coordination role. Only through
market-reflecting and market-clearing prices can any economy be fitly
joined together (Ephesians 4:16).
as an integral part of the price system, synchronizes the whole production
order from the raw material suppliers to the manufacturers to the retailers
and finally to the consumers. Like
any price, interest rates must be free to tell the truth. Market
conditions must either be reflected in their movements, or else shortages
and surpluses will result. The plans and purpose of market participants will
only be molded together to the extent interest rates reflect supply
and demand conditions that exist in reality.
Now back to the
business cycle. Credit expansion appears to increase the supply of
savings to the market. This greater supply of monetary savings, not real
savings, will lower interest rates lower than they otherwise would have
been. In its absence,
entrepreneurs would have faced higher market interest rates, which entail different
production decisions. Therefore the artificial rates discoordinate or
dissynchronize entrepreneurial production plans from consumer
spending-saving preferences. The result is that entrepreneurs are led to
believe the market desires more production later (through greater saving),
when in fact this is not the case! Therefore entrepreneurs embark on some
production plans that eventually will prove to be unsustainable and
Nowhere is the
crux of the economic problem of the business cycle more aptly described than
by Ludwig Von Mises: “The whole entrepreneurial class is, as it were,
in the position of a master-builder whose task it is to erect a building out
of a limited supply of building materials. If this man overestimates the
quantity of the available supply, he drafts a plan for the execution of
which the means at his disposal are not sufficient. He oversizes the
groundwork and the foundations and only discovers later in the progress of
the construction that the lacks the material needed for the completion of
the structure. It is obvious that our master builder’s fault was not over
-investment, but an inappropriate employment of the means [land, labor, and
capital] at his disposal.”7
the business cycle is described in a similar fashion in Luke 14:28: “For
which of you, intending to build a tower, does not sit down first and count
the cost, whether he has enough to finish it?
Lest, after he has laid the foundation, and is not able to finish it,
all who see it begin to mock him....”
The essence of
the business cycle should now be clear. Inflation or credit expansion breaks
the ninth commandment and thereby causes market entrepreneurs to miscount or
misjudge the real cost of their “towers” or investments. Market
conditions do not warrant many of these projects. There is insufficient
land, labor, and capital available to complete all production plans.
Malinvestments necessarily will be made. Consequently there must be an
inevitable readjustment period, known as a recession or depression, that
will liquidate the distortions generated by the credit expansion, and so
restore coordination and economic harmony. The recession is in reality the
healing phase where the errors caused by the interest rate deception are
Is it any
wonder a painful, high unemployment readjustment period is absolutely
necessary? Failure to count the
cost accurately leads to a cluster of business errors causing the whole
production order to be out of joint, or discoordinated, no
longer fitly joined together (Ephesians 4:16). The bust or recession
constitutes the painful means to restore fit and synchronization to
the economy. False witness
bears bitter fruit.
breaks All the Commandments
James 2:10, “For whoever shall keep the whole law, and yet stumble in one
point, he is guilty of all.” In other words, all the commandments are
interrelated. Inflation, by
violating the eighth and ninth commandments on stealing and false witness,
reacts and relates to each of the Ten Commandments.
has astutely observed this relationship: “Throughout history periods of
sound money [little or no inflation] have been marked by moral advance and
prosperity. Conversely, periods
of unsound money have been accompanied by moral incline.”8 It
might be noted, as well, that unsound money has been accompanied by economic
Why should this
be so? The answer is that
inflation, especially continuous inflation, leads individuals, in their
effort to cope with its effects, to disregard all of God’s commandments.
The principle involved is that a “little leaven leavens the whole
lump” (I Corinthians 5:6). The inflation sin of the leaders impacts on the
rest of society. Look up Isaiah
9:16. Such a society becomes “get” oriented and unrighteous in their
dealings and actions. Immoral actions do not generate prosperity but rather
describes it this way: “Inflation tends to demoralize those who gain by it
even more than those who lose by it. The gainers become used to an unearned
increment. They want to keep their relative gains....(Matthew 6:24). The
profiteers from inflation tend to spend freely, frivolously, ostentatiously.
This increases the resentment of those who have been less favored.”9
Hazlitt concludes: “Inflation makes it possible for some people to get
rich by speculation and windfall instead of hard work. It rewards gambling
and penalizes thrift. It
conceals and encourages waste and inefficiency in production...It promotes
speculation, gambling, squandering, luxury, envy, resentment, discontent,
corruption, crime, and increasing drift toward more intervention (perhaps
wage and price controls) which may end in dictatorship.”10
how inflation, by violating the commandments against stealing and false
witness, produces a chain-reaction with God’s eight other laws.
First, it seems
axiomatic that stealing must begin as covetousness, a violation of the Tenth
Commandment (Exodus 20:17). Further,
those who steal, lie, and covet necessarily have elevated the self above the
true God, thereby violating the First and Second Commandments (Exodus
20:3-6). Indeed, inflation can
only come into existence by a rebellion against God, ignoring Him and His
immutable Spiritual laws (Mark 12:30).
Those responsible for inflating have put another “god” in
preference to or in place of the true God.
reaction continues as the victims of inflation find it easier, given their
deteriorating circumstances, to trample on God’s Holy time (Exodus
20:8-11). Contrary to God’s instruction, the Fourth Commandment is no
longer remembered. Notice this attitude in Amos 8:5. Inflation victims may
even wonder why God has forsaken them, perhaps even cursing Him or using His
name in a vain way (Exodus 20:7).
dishonors our Spiritual Father in heaven, hence the Fifth Commandment is
broken (Exodus 20:12). Moreover, inflation also tends to dishonor ones
physical parents as well. By
consuming savings and pensions, inflation can destroy the hopes, life-long
dreams, and plans for financial security and economic independence. What a
degrading way to end one’s latter years, as a financial liability
dependent on others or one’s children, when one should have been able to
enjoy the fruit of one’s life efforts. Frankly, God desires “ a good
man” to be able to leave an inheritance to his grandchildren (Proverbs
squandering, waste, and impoverishment generated by credit expansion will
tend to weaken family ties as mothers will be forced to seek employment
outside the home to maintain the family standard of living. Children
subsequently lose the indispensable training in right values they need from
their parents. This lack of training may encourage, among other things,
general permissiveness and violation of the Seventh Commandment against
adultery (Exodus 20:14).
noted previously, inflation promotes resentment, envy, and discontentment.
As a result, individuals break the spiritual intent of the Sixth
Commandment against murder even if they do not commit the overt act (Exodus
inflation and credit expansion a society will be induced to break all Ten
Commandments. But only a nation that obeys God will be blessed with economic
prosperity (Psalms 33:12). That is why periods of sound, honest money are
periods of economic prosperity while inflationary periods are marked by
moral and economic decline.
Optimum Quantity of Money
of this article has been to reveal the “missing dimension” or spiritual
side of money and inflation. The conclusion thus far is that any monetary
debasement, which includes ANY increase in government fiat money (currency)
or its substitutes, is an immoral act condemned by God’s law. The penalty
brings many economically counterproductive consequences.
Yet, many may
have wondered if the quantity of money must remain fixed forevermore.
The answer is no. Under God’s law, commodity money is like any
other desired good. Its
production will be governed by the expected profitability in producing it.
But society never needs to be concerned about the supply of its monetary
metals. No regulatory authority, like the Federal Reserve System, is needed
to manage the money. The
optimum quantity of money is whatever exists.11
relatively small quantity of money in existence, an ounce of gold would be
very valuable. That is, prices of goods would be very low. Conversely, a
greater supply of money will lower the unit value of gold.
Prices of goods would be higher. What this means is that the price
structure adapts itself to the quantity of money in existence.
Indeed, that is why inflation causes higher prices.
This does not
mean, however, that trade and economic growth will somehow be hindered. Just the opposite! Without credit expansion and its malinvestments,
capital formation and productivity will be enhanced greatly. As long as
prices are free to adjust to market conditions, trade and employment can
expand without any practical limit. With rising productivity, goods’
prices will generally tend to decline. This will then signal more gold
production which tends to counterbalance or stabilize the overall price
production does not violate any spiritual laws.12 Gold or silver
production does not entail any redistribution of income or wealth to
non-producers. Gold producers receive their income by producing a product,
gold, just like the producer of any good or service. Further, an increase in
the available money supply will not falsify interest rates. Any new money
saved and invested in the loan market reflects consumer preferences. No discoordination
or falsification of interest rates occurs. Therefore no business
cycle is generated.
“missing dimension” of economic phenomena is that the success of
economic activities are governed by the spiritual realm. Economic actions
are always human actions, and the latter are always subject to right and
wrong. Mankind must eventually come to understand this relationship if the
curse of inflation that now engulfs the world, and for that matter, other
economic curses, is ever to be resolved.
wrong (evil) because it breaks God’s spiritual laws. God’s laws govern
the universe (Hebrews 1:3). And God has revealed that economic prosperity depends upon
spiritual obedience (Deuteronomy 30:15-20). Since inflation, as has been
shown, violates or leads to the violation of all Ten Commandments, it
follows therefore that inflation will produce anything but economic
problem of inflation is spiritual or moral in nature. Only economic analysis
that has a Biblical foundation however, what may be called Biblical
Economics, can generate this knowledge and understanding.
of inflation is really quite simple. Don’t print more money.
Return to a full gold-coin standard.
Pull the plug on the printing presses. Yet our analysis makes it
plain that a real, lasting solution must recognize the immorality of
then is basically twofold to establish a lasting solution. First, the
foundation or paradigm of modern day economic theory must be shown to the
proponents to be erroneous. Man’s
reasoning as the sole source of knowledge and right and wrong, known as
humanism, must be proved to be woefully deficient in its ability to grasp
real economic relationships of cause and effect.
science has ascribed to the Adam and Eve prerogative (Genesis 3:5). Like Adam and Eve, they have taken to themselves the right to
determine the knowledge of what is good and what is evil. They do not
believe God. They do not believe that God’s Word is the foundation of all
carnal mind is hostile to God (Romans 8:7).
It is not subject to the laws of God. Therefore it cannot come to the
knowledge of the relationship between spiritual and economic events. Its
foundation will not permit the discovery of economic truth.
suggest to the scientific economic community today that their research must
be grounded on the Bible, would undoubtedly be greeted with incredulity,
sarcasm, scorn, and howls of laughter!
But to the humanistic individual, God says: “There is a way which
seems right to a man, but its end is the way of death (Proverbs 14:12).
Inflation under humanistic direction will ultimately accelerate to
hyperinflation and the death of the money!
In a humanistic
framework, man becomes “god” and government becomes his agency to manage
money and the economy. They experiment and choose, like Adam and Eve, those
theories that have the greatest predictive power or highest statistical
correlation. And based on these “facts,” they endeavor to formulate
right and wrong policy, outside ethical deliberations!
A second and
more closely related problem, even if the worldly economists could be convinced,
is that a majority of people must come to grasp that the inflation problem
is indeed a moral problem. A humanistic society will never tolerate Godly
money. They will undoubtedly want some form of paper money.
bag of inflation can be patched up only when the Biblical paradigm replaces
secular humanism as public policy. Frankly the outlook is not good to say
the least. But there is good
news ahead! God has promised at some future date to put His laws into our
hearts and minds (Hebrews 10:16).
Until that day,
those that do have the understanding ought to profess it to those that have
ears to hear, and to live it by not demanding our share of Caesar’s
money from Caesar.
Hazlitt, What You Should Know About Inflation (Funk and Wagnalls,
only exception would be Austrian economists.
those who may want to verify this fact beyond a shadow of a doubt, look up
and study money in a topical bible.
John Rushdoony, “Hard Money and Society in the Bible,” in Hans Sennholz
(ed.), Gold Is Money (Greenwood Press, 1975), p. 159.
All Bible quotations are from the New King James Version.
shekel was simply a unit of weight like our ounces and pounds. It means
“to weigh – see Daniel 5:27” Since money had to be weighed out prior
to the advent of coinage, is it surprising the name for the money became the
shekel for the Israelites? Many
modern day currency names originated the same way.
a more detailed explanation of the business cycle, see Murray N. Rothbard, America’s
Great Depressiom, (Nash Publishing, 1963).
von Mises, Human Action (Henry Regnery, 1963) p.560.
W. Reed and Dale M. Haywood, When We Are Free (Northwood Institute
Press, 1981). p. 125.
Hazlitt, What You Should Know About Inflation (Funk and Wagnalls,1968), p. 131.
an in depth analysis, see Hans Sennholz, “No Shortage of Gold,” in Hans
Sennholz (ed.) Gold Is Money (Greenwood Press, 1975).
principle, money substitutes that are fully backed by commodity money (like
a warehouse receipt) would also be honest money.
That is, money certificates would not violate God’s law.
Their issuance would not change the outstanding quantity of money.
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